Best way to fund a property

2006Kuredu

Hi All,

First of all sorry for so many questions but I am undertaking what could probably be best described as a brain dump in the hope someone may be able to make sense of the questions.

I am looking to purchase another home in the UK by the coast in an area I love and was initially looking to use this as a holiday let to help fund it although reading more into the rules, regulations and paperwork it looks a very complicated process (insurance, fire safety, stair gates etc)! To avoid loosing out on the property I am now looking to see if it is something I could look to fund alone without the need to rent it out.

My financial situation in brief, my current property is valued circa 350k with 127k mortgage remaining (18 years left). The property I am looking to purchase is circa 90k. I have done some quick "how much can we borrow" calculations with my bank and they seem happy to lend a good (or stupid in my opinion!) amount as our joint income is 107k per annum.

Options I can think of are...

- Remortgage the current property by an additional 90k to purchase the other property outright (although I would have thought my bank would ask why I would want to increase my current mortgage?)

- Apply for a mortgage on the other property, but can you have 2 mortgages?

Other ideas I had as I may not be able to move to / use the coastal property for 12 months but don't want to loose it.....

- Remortgage my current property by an additional 90k to purchase the other property and then rent it (is this even legal?!) as technically it will not be mortgaged so I assume does not qualify as a buy to let?

- Get a buy to let mortgage on the other property and then rent it - But once this is in place can I revert it to a normal mortgage when I stop renting it in circa 12 months?

Thanks for any advice and suggestions.

glosoli

You can remortgage your existing home to purchase the new property, of course they will ask what you are using the funds for, but raising capital to purchase another property is a valid reason so no reason to worry there. If you do it this way and purchase the other property outright, then you can do with that property what you wish as there is no loan secured against it.

If you were to put a buy to let mortgage on the property you are looking to buy, then generally speaking it would have to be rented out through an AST rather than on a holiday let basis, and you would have to fund the deposit of at least 20-25% also. You may be able to revert it to a regular residential mortgage in 12 months time when you move into it, but this would be fully subject to a full mortgage application (as you would be going from an unregulated to a regulated agreement).

2006Kuredu

Thanks, is it normally easier to ask the current lender or an opportunity to shop around for deals? I'm on a fixed rate until October 2018 so I'm unsure if they would honour this or I pay to buy out.

glosoli

Both to be honest,

Check to see if your existing product is tied in (or if your existing mortgage is on particularly favourable terms such as an old tracker rate which other products are unable to compete with), and compare this to other offerings through other providers and see what is best.

You will need to compare your existing mortgage and the new borrowing with your existing provider, in terms of fees and interest rates, and see what it is like elsewhere. If you didn't wish to do this yourself then you could always contact a mortgage broker to examine the whole of the market on your behalf.

2006Kuredu

I'm currently on a lloyds bank 5yr fixed at 3.39% expires October 18.... yes I was the guy who thought rates would go up and it was a good time to lock in!

glosoli

Isn't hindsight a great thing!

Just remember to include the early repayment charge within any comparison you do to see if it would be financially worthwhile to change lender.

http://www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator

Might be a useful tool to use.

2006Kuredu

Great tool, thanks

2006Kuredu

Reading through some of these threads it appears many people are having issues converting the AIP to a formal mortgage. I'm looking at different lenders at the moment and keep thinking are some easier to get approval from than others? If so who places where? I'm looking at Nationwide and West Brom at the moment and perhaps First Direct